Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2019

Summary of Company's fair value hierarchy measured at recurring basis

The following table presents the Company’s fair value hierarchy for those assets and liabilities measured and carried at fair value on a recurring basis. At March 31, 2019, Level 3 invested assets comprised 3.3% of the Company’s total investment portfolio at fair value.



($ in thousands)					Fair Value Measurements at
	Carrying		Fair		Reporting Date Using
	Amount		Value		Level 1			Level 2			Level 3
March 31, 2019
Financial Assets
Investments
Fixed maturity securities
U.S. Government and federally sponsored agency obligations:
Mortgage-backed securities	$	820,187	$	820,187	$	—		$	816,743		$	3,444
Other, including U.S. Treasury securities	865,458		865,458		17,080			848,378			—
Municipal bonds	2,083,044		2,083,044		—			2,035,288			47,756
Foreign government bonds	86,235		86,235		—			86,235			—
Corporate bonds	2,134,092		2,134,092		13,722			2,037,888			82,482
Other mortgage-backed securities	1,808,988		1,808,988		—			1,676,642			132,346
Total fixed maturity securities	7,798,004		7,798,004		30,802			7,501,174			266,028
Equity securities	105,487		105,487		55,030		—	50,452		—	5
Short-term investments	143,454		143,454		141,793			1,661			—
Other investments	23,393		23,393		—			23,393			—
Totals	$	8,070,338	$	8,070,338	$	227,625		$	7,576,680		$	266,033
Separate Account (variable annuity) assets ⁽¹⁾	$	2,224,099	$	2,224,099	$	2,224,099		—			—
Financial Liabilities
Investment contract and life policy reserves, embedded derivatives	$	801	$	801	$	—		$	801		$	—
Other policyholder funds, embedded derivatives	$	84,629	$	84,629	$	—		$	—		$	84,629

December 31, 2018
Financial Assets
Investments
Fixed maturity securities
U.S. Government and federally sponsored agency obligations:
Mortgage-backed securities	$	787,441	$	787,441	$	—		$	784,224		$	3,217
Other, including U.S. Treasury securities	833,542		833,542		13,291			820,251			—
Municipal bonds	2,003,969		2,003,969		—			1,956,438			47,531
Foreign government bonds	84,904		84,904		—			84,904			—
Corporate bonds	2,079,510		2,079,510		12,281			1,986,487			80,742
Other mortgage-backed securities	1,725,952		1,725,952		—			1,608,958			116,994
Total fixed maturity securities	7,515,318		7,515,318		25,572			7,241,262			248,484
Equity securities	111,750		111,750		64,330			47,415			5
Short-term investments	122,222		122,222		117,296			4,926			—
Other investments	16,147		16,147		—			16,147			—
Totals	$	7,765,437	$	7,765,437	$	207,198		$	7,309,750		$	248,489
Separate Account (variable annuity) assets ⁽¹⁾	$	2,001,128	$	2,001,128	$	2,001,128
Financial Liabilities
Investment contract and life policy reserves, embedded derivatives	$	248	$	248	$	—		$	248		$	—
Other policyholder funds, embedded derivatives	$	78,700	$	78,700	$	—		$	—		$	78,700

________________

⁽¹⁾ Separate Account (variable annuity) liabilities are equal to the estimated fair value of the Separate Account (variable annuity) assets.

Table for reconciliations for all Level 3 assets measured at fair value on a recurring basis

The following table presents reconciliations for the periods indicated for all Level 3 assets and liabilities measured at fair value on a recurring basis.



($ in thousands)	Financial Assets																				Financial Liabilities⁽¹⁾
	Municipal Bonds			Corporate Bonds			Other Mortgage- Backed Securities ⁽²⁾			Total Fixed Maturity Securities			Equity Securities			Short-term Investments		Total
Beginning balance, January 1, 2019	$	47,531		$	80,742		$	120,211		$	248,484		$	5		$	—	$	248,489		$	78,700
Transfers into Level 3⁽³⁾	—			3,074			21,934			25,008			—			—		25,008			—
Transfers out of Level 3 ⁽³⁾	—			—			—			—			—			—		—			—
Total gains or losses
Net investment gains (losses) included in net income related to financial assets	—			—			—			—			—			—		—			—
Net realized (gains) losses included in net income related to financial liabilities	—			—			—			—			—			—		—			4,334
Net unrealized investment gains (losses) included in OCI	344			2,549			(152		)	2,741			—			—		2,741			—
Purchases	—			—			—			—			—			—		—			—
Issuances	—			—			—			—			—			—		—			3,018
Sales	—			—			—			—			—			—		—			—
Settlements	—			—			—			—			—			—		—			—
Paydowns, maturities and distributions	(119		)	(3,883		)	(6,203		)	(10,205		)	—			—		(10,205		)	(1,423		)
Ending balance, March 31, 2019	$	47,756		$	82,482		$	135,790		$	266,028		$	5		$	—	$	266,033		$	84,629

Beginning balance, January 1, 2018	$	49,328		$	72,979		$	107,944		$	230,251		$	6		$	—	$	230,257		$	80,733
Transfers into Level 3 ⁽³⁾	—			10,778			14,822			25,600			—			—		25,600			—
Transfers out of Level 3 ⁽³⁾	—			—			—			—			—			—		—			—
Total gains or losses
Net investment gains (losses) included in net income related to financial assets	—			—			—			—			3			—		3			—
Net realized (gains) losses included in net income related to financial liabilities	—			—			—			—			—			—		—			(2,222		)
Net unrealized investment gains (losses) included in OCI	443			(887		)	(1,022		)	(1,466		)	—			—		(1,466		)	—
Purchases	—			—			—			—			—			—		—			—
Issuances	—			—			—			—			—			—		—			1,332
Sales	—			—			—			—			(3		)	—		(3		)	—
Settlements	—			—			—			—			—			—		—			—
Paydowns, maturities and distributions	(23		)	(4,090		)	(6,410		)	(10,523		)	—			—		(10,523		)	(1,357		)
Ending balance, March 31, 2018	$	49,748		$	78,780		$	115,334		$	243,862		$	6		$	—	$	243,868		$	78,486

________________


⁽¹⁾	Represents embedded derivatives, all related to the Company's FIA products, reported in Other policyholder funds in the Company’s Consolidated Balance Sheets.


⁽²⁾	Includes U.S. Government and federally sponsored agency obligations for mortgage-backed securities and other mortgage-backed securities.

⁽³⁾

Transfers into and out of Level 3 during the three month periods ended March 31, 2019 and 2018 were attributable to changes in the availability of observable market information for individual fixed maturity securities and short-term investments. The Company’s policy is to recognize transfers into and transfers out of the levels as having occurred at the end of the reporting period in which the transfers were determined.

Summary of fair value assets and liabilities measured on nonrecurring basis

The Company has various other financial assets and financial liabilities used in the normal course of business that are not carried at fair value, but for which fair value disclosure is required. The following table presents the carrying value, fair value and fair value hierarchy of these financial assets and financial liabilities.



($ in thousands)					Fair Value Measurements at
	Carrying		Fair		Reporting Date Using
	Amount		Value		Level 1		Level 2		Level 3
March 31, 2019
Financial Assets
Investments
Other investments	$	157,006	$	161,714	$	—	$	—	$	161,714
Financial Liabilities
Investment contract and life policy reserves, fixed annuity contracts	4,585,141		4,509,518		—		—		4,509,518
Investment contract and life policy reserves, account values on life contracts	89,048		92,200		—		—		92,200
Other policyholder funds	737,184		737,184		—		676,520		60,664
Long-term debt	297,810		306,801		—		306,801		—

December 31, 2018
Financial Assets
Investments
Other investments	$	156,725	$	161,449	$	—	$	—	$	161,449
Financial Liabilities
Investment contract and life policy reserves, fixed annuity contracts	4,555,849		4,478,338		—		—		4,478,338
Investment contract and life policy reserves, account values on life contracts	87,229		90,402		—		—		90,402
Other policyholder funds	689,287		689,287		—		626,325		62,962
Long-term debt	297,740		291,938		—		291,938		—